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Note: This document forms part of our publication Tax basics for non-profit organisations. To view the full publication, click here.
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If your organisation has employees, you must withhold amounts from their pay and send the withheld amounts to the Tax Office. This process is called withholding and is done through the pay as you go (PAYG) withholding system.
You must register your organisation with the Tax Office when you are required to withhold from payments to your employees.
The amount to be withheld from an employee’s pay depends on the amount they are paid and the information an employee has provided in a Tax file number declaration (NAT 3092) and/or a Withholding declaration (NAT 3093).
The Tax Office publishes tax tables that list the amounts to withhold from weekly, fortnightly and monthly pays.
If your organisation is a small organisation, it reports and pays the withheld amounts to the Tax Office monthly or quarterly when you lodge your organisation’s activity statements.
You are also required to give each employee an annual payment summary of the amount withheld from them during the year. You also need to provide an annual report to the Tax Office about withheld amounts.
Directors are treated similarly to employees for PAYG withholding purposes.
The most common circumstances that could arise where an organisation may have PAYG withholding obligations other than for employees would be:
- payments under PAYG voluntary agreements, and
- payments where no ABN is quoted on an invoice.
The rates of withholding depend on the type of payment. For example, the ‘no ABN quoted’ withholding rate is 46.5%, while the rate to be used for a PAYG voluntary agreement is either a flat rate of 20% or the payee’s PAYG instalment rate.
You should check with the Tax Office on the rates that apply to other payments.
A payment summary is also issued to individuals and entities (who are not employees) showing amounts that have been withheld under other types of PAYG withholding.
No. Every payer has to withhold from payments subject to PAYG withholding. Organisations that are exempt from income tax are not exempt from PAYG withholding obligations.
If your organisation pays salaries or wages or makes any other payments that are subject to PAYG withholding, your organisation will need to register.
Your organisation can register for PAYG withholding by either completing a form (which you can send us in paper or electronic form) or by contacting us.
If you are applying for an ABN for your organisation, you can use the same form to register for PAYG withholding.
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To obtain a registration form for PAYG withholding:
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If your organisation makes a payment that is subject to PAYG withholding, you must withhold the required amount from the payment and send this to us by the due date. The amount withheld will be reported on your organisation’s activity statement along with any GST, PAYG instalments or FBT amounts. Any credits your organisation is entitled to (such as GST credits) will be offset against any amount of PAYG withholding and other tax liabilities it is required to report on its activity statement.
You send these amounts monthly or quarterly, depending on your organisation’s withholding status (small or medium withholder). If your organisation is a large withholder, you have to send amounts more frequently.
At the end of the year you must submit an annual report to us that reconciles all withholding payments your organisation has made to us during the financial year.
Last Modified: Monday, 15 October 2007
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